Security Issues On Tanzania's Borders Will Pose Risks

Tensions relating to Tanzania's southern neighbours Malawi and Mozambique have the potential to pose risks to regional stability in the coming years.

While the border dispute at Lake Malawi (known as Lake Nyasa in Tanzania) is unlikely to escalate, risks are increasing with Malawi's upcoming election in 2019.

Meanwhile, increasing activity by Islamist militants on the border with Mozambique offers a newer threat and could hurt investment in the gas sector.

We retain our longstanding view that the border dispute at Lake Malawi is unlikely to threaten regional stability, but risks could rise as the Malawian election nears. While the Tanzanian government claims that the border runs through the middle of the lake, the Malawian administration claims that its territory runs up to the Tanzanian shoreline. The disagreement has been ongoing since 1967, but was re-ignited in 2012 when Malawi sold oil blocks in the disputed area ( see 'Malawi/Tanzania Border Dispute To Drag On, But Little Threat To Stability', June 2 2017). Our core view remains that a diplomatic resolution will most likely be achieved, with Tanzania requesting an arbitrated resolution with the assistance of the Southern African Development Community bloc. In response to delays, Malawi's government said it would seek an International Court of Justice ruling, but this is yet to be requested. Risks have risen owing to the coming Malawian general election in May 2019, which could see President Peter Mutharika politicise the dispute for electoral gain. Indeed, he made it a central issue in his 2014 presidential campaign. Moreover, with the current Tanzanian administration's increasing tendency towards resource nationalism under President John Magufuli ( see 'Protectionism And Populism Threaten Economic Trajectory', September 1 2017), the dispute could potentially become increasingly bitter if inflamed.

Border Disputes And Foreign Threats Pose Risks

Tanzania - Map Of Southwestern Borders

Source: Fitch Solutions, d-maps

Furthermore, the recent emergence of an Islamist militant group in Northern Mozambique, near Tanzania's border, could pose a risk if it spreads to Tanzania's southern areas. The small militia known as Ansar al- Sunna has attacked several villages since October. This has impacted the activities of foreign gas firms operating in Mozambique, with Anadarko having suspended some production activities and moved staff to a secure site. Wentworth Resources also extended its exploration licenses owing to delayed operations, and its workers have had trouble accessing affected areas. If attacks spread to Tanzania, this could put extra pressure on security services and likely require an expansion of the security budget. Moreover, these areas are close to the country's significant gas reserves, for which the government has been trying to secure a final investment decision. This has already been delayed owing to investor concerns about the fiscal regime and regulations, and if militant activity occurs nearby, the security risks could further reduce the attractiveness of such a project for investors.